Investor confidence on the rise

Investor confidence on the rise

Investor confidence is on the rise according to the latest findings by the global investment giant Hargreaves Lansdown. The Hargreaves Lansdown investor confidence index rose for the third consecutive month in February, now standing at 80 points.

The index is a good barometer for the current mood in the investment market and for DIY investors, it is the prospects for US shares that is getting everybody excited, with a confidence score of 68%. Hot on the heels of this is the Asia Pacific markets which has a confidence score of 65%.

Currently, the US market stands at a CAPE (Cyclically Adjusted P/E) ratio of 26.6 compared to a long run average of 24.7 so in valuation terms, it was already coming from a position of strength. Asia Pacific markets, on the other hand, are trading at a CAPE ratio of 14.8 compared to a long run average of 22.5, so this is emerging from a period of relative weakness.

Commenting on the situation, Laith Khalad, senior analyst at Hargreaves Lansdown, said “Investor confidence is gradually edging up, though there’s still a lot of caution in the air. That’s understandable, as a number of dramas are unfolding this year, including elections across Europe, the evolution of the Trump presidency, and of course the start of the UK’s withdrawal from the EU.”

Not surprisingly, investors have less confidence about the prospects for Europe at the moment, and the Hargreaves Lansdown index only managed a confidence score of 51%. Having said that, valuations in Europe still look fairly attractive, with a CAPE ratio of 13.6 compared to a long run average of 20.7

Interestingly, private investors still seem to have most confidence in the US stock market at the moment, perhaps believing that Trump’s business know-how will have a positive impact. Analysts recommend that long-term investors would do well to have a good mix of equities in their portfolio to generate decent returns, particularly with forecasted inflation on the horizon. Cash returns continue to perform very poorly and whilst bond yields are picking up, they still carry some risk in the current politically volatile environment.